Is Splunk Stock a Buy?
Following lower-than-expected fiscal third-quarter results, Splunk (NASDAQ: SPLK) stock price dropped by approximately 20% during after-hours. Yet the data analytics and monitoring specialist's cloud business kept generating impressive growth, and the company remains exposed to a huge addressable market management estimated at $81 billion. So should investors worry about Splunk's disappointing performance? Or is the stock now a buy?
Given the surge in demand for cloud computing and subscription offerings over the last several years, Splunk has been transitioning from its legacy on-premises data analytics and monitoring software business to a subscription-based cloud portfolio.
That shift negatively affects revenue recognition under generally accepted accounting principles (GAAP), though. The company's new subscription business model corresponds to lower revenue recognition because of smaller annual ratable payments compared to previous multi-year term licenses with large upfront payments.
Source Fool.com
